Margins Squeezed and huge debt.18 Oct 2021 22:27
The IAG (LON: IAG) share price collapsed by more than 3% as worries about margins rose. Investors are also waiting for key quarterly results from some of its American peers. The stock declined to 175p, which was about 12% below the highest level this month.
This performance was mostly because most analysts expect that demand for air travel will keep rising in the coming months. In particular, there are signs that transatlantic travel will restart in November. This is notable since these flights are usually its most profitable.
However, there are also concerns about the company’s margins as the price of crude oil rises. On Monday, the price of Brent jumped to $83 while West Texas Intermediate (WTI) soared to more than $80. This trend will translate to higher jet fuel prices. This is notable since jet fuel is the biggest cost for many airlines.
These concerns were exacerbated last week when Delta Airlines delivered its results. While the company turned a profit in the third quarter, the management warned that high fuel costs will affect its margins.
The IAG share price has been in a bit sluggish lately. And on Monday, the stock managed to move below the key support at 171p, where it has struggled moving below several times before.